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THE JOY OF FLEX

Although fund selection can be daunting, strategies that embrace flexible global allocation continue to be rewarded with consistent positive flows and fast, steady growth

While it’s no secret that passive, low-cost products are relentlessly increasing their market share, investors’ hunt for yield has also buoyed sentiment towards flexible and unconstrained mandates. The Morningstar EUR Flexible Allocation – Global category epitomises the trend: overall, funds in this category pocketed cumulative inflows of over €40bn in the three years through to the end of April 2017 (excluding feeders and fund of funds).

The growth in assets has been fast but steady. Since January 2010, these strategies have enjoyed positive flows in every single month except one. As recently as March 2017 they recorded the second-best month since Morningstar started tracking flows data, with roughly €2.4bn of net inflows.

Daunting selection

Unfortunately, fund selection in this universe can at times be daunting. However, asset management firms have seized the opportunity by increasing their offerings in the space. The category currently counts more than 1,500 funds in total, with a plethora of young players and a decent amount of churn in recent years.

In the five-year interval from 2012 to the end of 2016, we counted 805 fund launches and 614 terminations – that is, funds either merged or liquidated. As a result, almost one-third of the funds in the category don’t have the three-year track record required for a Morningstar rating.

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